Forex, or foreign exchange, is the global market where currencies are bought and sold against each other. Forex trading is the act of taking a long or short position on a currency pair in order to profit from a change in the exchange rate. The wholesale market runs over the counter across the Sydney, Tokyo, London and New York sessions, five days a week. Retail traders usually access it through a broker, most often as a contract for difference rather than by exchanging physical banknotes.
Updated: October 2026
What Is Forex?
Forex (also written FX) is the market for exchanging one national currency for another. Every cross-border invoice, tourist cash exchange and reserve-manager rebalancing is a foreign-exchange transaction. The prices those flows produce are quoted as currency pairs: the value of a base currency in units of a quote currency.
The modern floating-rate system grew out of the early 1970s, when major currencies moved off the post-war pegs and were allowed to trade on supply and demand. There is no single exchange floor. Deals are agreed over the counter between banks, funds, corporations and, through brokers, retail clients. Trading pauses for a weekend close; from the Sydney open on Monday to the New York close on Friday the market is effectively continuous as each session hands off to the next.
It is the largest financial market by turnover. The Bank for International Settlements Triennial Central Bank Survey put average daily OTC FX turnover at about $9.5 trillion in April 2025. That snapshot includes spot, forwards, swaps and options among reporting dealers. It is not a live ticker, and it is not retail CFD volume at one broker.
Size does not mean the market cannot reprice fast. Spot FX between banks is subject to conduct and reporting rules in major centres. Retail CFDs on FX are product-regulated in the EU, the UK, the US and elsewhere. Liquidity is usually deep in EUR/USD during the London–New York overlap; it is thinner in an exotic pair at 03:00 GMT. A scheduled data release can still reprice a major pair by tens of pips in seconds.
What Is Forex Trading?
Forex trading, in the sense used on this site, is taking a directional position on a pair and closing it later at a different rate. If the base currency rises against the quote currency, a long position gains; if it falls, a short position gains. The trader is not required to take delivery of banknotes. Most retail accounts settle the difference in account currency.
That retail contract is typically a CFD or a rolling spot product offered by a Forex broker. The wholesale market still prices the underlying pair. The broker’s bid and ask, margin schedule and overnight swap are the terms the retail trader actually trades. Broker models differ: some internalise flow, some match or hedge in the market. Execution quality is part of choosing a broker, not a detail to ignore because the chart looks the same.
Profit and loss are measured first in pips, then converted to money with pip value and lot size. Leverage decides how much margin that lot requires. Those three ideas are the mechanics, not a method for beating the market.
Currency Pairs
A pair is written as BASE/QUOTE. EUR/USD at 1.1000 means one euro costs 1.1000 US dollars. ISO codes are three letters: USD, EUR, JPY, GBP, AUD, CAD, CHF, NZD and so on. The first two letters often point to the country or area; the last letter points to the unit (dollar, franc, yen).
Pairs are grouped for convenience:
- Majors — the most traded combinations against the US dollar, such as EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD and NZD/USD.
- Minors (crosses) — pairs that do not include USD, such as EUR/GBP, EUR/JPY or AUD/NZD.
- Exotics — a major currency against a less liquid currency, often with a wider spread and a larger jump risk around local news.
The currency pair guide covers quoting, base versus quote, and how to read the price. For this pillar it is enough to remember that you always buy one currency and sell the other at the same time. There is no isolated “buy euros” ticket on a standard FX CFD; the other side of the pair is always there.
The US dollar remains the dominant currency in global FX turnover. That is why so many retail screens default to USD pairs, and why pip-value shortcuts that assume a USD quote fail on USD/JPY and on crosses. Check the pair you are actually trading.
Sydney, Tokyo, London and New York Sessions
Because the market is over the counter, “open” means when dealing desks in that centre are active, not a bell. The four sessions that matter for most price action are Sydney, Tokyo, London and New York. Hours below are typical Greenwich Mean Time (GMT) figures used as a teaching grid. Daylight saving in Australia, Japan (which does not use it), the United Kingdom and the United States all shift the clock by up to an hour, so treat the table as a map, not a binding timetable.
| Session | Typical GMT open | Typical GMT close | What tends to trade |
|---|---|---|---|
| Sydney | 22:00 | 07:00 | AUD, NZD; week open |
| Tokyo | 00:00 | 09:00 | JPY pairs; regional data |
| London | 08:00 | 17:00 | EUR, GBP; deepest liquidity |
| New York | 13:00 | 22:00 | USD; US data and the close |
The London–New York overlap (about 13:00–17:00 GMT in this grid) is usually the busiest window for EUR/USD and GBP/USD. The Tokyo morning can dominate USD/JPY. Sydney sets the first prints after the weekend, which is when gaps from Friday’s New York close become visible.
Session does not guarantee a trend. It changes who is present, how wide the spread is, and how far a given lot can move before it finds a matching order. A strategy that assumes London liquidity at 03:00 GMT on an exotic pair is using the wrong map.
How a Forex Trade Works
A complete round-turn looks like this.
First, pick a pair and a direction: long if the base is expected to strengthen against the quote, short if it is expected to weaken. That is the same long and short logic as other markets, applied to two currencies at once.
Second, choose a volume in lots. A 0.10 lot of EUR/USD is 10,000 euros. That volume sets pip value. On EUR/USD in a USD account, 0.10 lot is about $1 per pip; 1.00 lot is about $10 per pip.
Third, the platform shows a bid and an ask. You buy at the ask and sell at the bid. The difference is the spread, the first cost of the trade. A market order fills at the available price; a limit order waits for a specified price and may not fill.
Fourth, margin is reserved according to the account’s leverage and the notional of the lot. The unused cash is free margin. Floating profit and loss then move equity as the quote changes.
Fifth, the position is closed with an opposite order. Pips of difference times pip value, minus spread, commission and any swap, is the cash result. The reserved margin is released.
Illustrative numbers: EUR/USD is quoted 1.1000 bid / 1.1002 ask. A trader buys 0.10 lot at 1.1002, then sells at 1.1025. That is 23 pips, or about $23 gross at $1 per pip, before commission and any swap. These figures are rounded examples, not a live price from a named broker.
If the same 0.10 lot had been sold at 1.1000 and bought back at 1.1025, the short would have lost those pips plus the exit spread. Direction is the whole trade, not optional arithmetic.
Costs: Spread, Commission and Swap
The spread is the bid–ask difference, usually quoted in pips or pipettes. It is wider when liquidity is thin, around data releases, and on exotics. It is the cost you pay even on a trade that is opened and closed in the same minute. Some account types add a commission per lot and show a rawer spread; the total cost is spread plus commission, not whichever number looks smaller on a banner.
Swap, or overnight financing (sometimes called rollover), is a credit or debit when a position is held past the broker’s daily cut-off, often 17:00 New York time. It reflects interest-rate differentials between the two currencies, plus the broker’s markup. A pair can pay a positive swap on one side and charge a negative swap on the other. Triple swap on the Wednesday/Thursday rollover is a common convention to cover the weekend, but the weekday can differ by firm. Swap is not a pip of price movement; it still changes the cash result of a multi-day trade.
Other costs exist: conversion of P/L into the account currency, inactivity or withdrawal fees, and slippage when the fill is worse than the chart. They belong in a cost check before a method is called profitable on paper.
Promotional credit does not cancel spread or swap. Bonus rules can restrict withdrawals until a turnover condition is met. That is a product term, not a market feature.
Risk in Forex Trading
Market risk is the exchange rate moving against the position. Leverage does not create that move; it determines how large a lot the account can hold, and therefore how many dollars each pip is worth. A 30-pip drop on 0.01 lot of EUR/USD is about $3. The same 30 pips on 1.00 lot is about $300. Risk management is matching that cash figure to a planned loss, as set out in the risk management guide.
Gap and slippage risk appear when the market skips prices: a weekend close to open, a central-bank headline, a halt in a related asset. A stop-loss is an order, not a filled price. Gap through the stop and the loss is larger than the pip distance on the chart.
Margin risk is the account running out of equity relative to used margin. Stop-out closes positions to protect the broker’s book. In some jurisdictions retail negative-balance protection caps the client at the deposit; in others a fast move can leave a debit. EU retail CFD rules are a known example of the former; they are not global.
Counterparty and operational risk sit with the firm that holds the margin: custody of funds, platform uptime, withdrawals, and the legal entity named on the account.
None of this is improved by treating Forex as a market “free of external controls.” It is a large OTC market with session liquidity, product rules for retail CFDs, and ordinary ways to lose money when size is too large for the stop. Chart methods try to decide direction and holding period. They do not remove spread, swap or leverage.
Demo Practice Before Live Size
A demo account is the place to see lots, pips, margin and swap on a statement without depositing. It is useful for learning the platform and for checking that a 20-pip stop on 0.10 lot is the cash amount you think it is. It is a poor predictor of live slippage, of widened news spreads, and of how a real loss feels.
If the live account will be a small retail balance at 1:30, a demo with a virtual $50,000 at 1:500 teaches the wrong muscle memory. Match the demo’s leverage and balance to the live plan, or the first live lot will be an accidental multiple of the practice size.
From here the silo splits by object: what a pip is, what a lot is, what leverage is, what a pair is, and what a broker is. Those pages carry the formulas. This page is the map of the market those formulas sit in.
Trading CFDs and Forex with leverage can result in losses that exceed the deposit. This page is educational and is not investment advice. Figures in the examples are illustrative and should be checked with the broker before they are used on a live order.
Frequently Asked Questions About Forex and Forex Trading
What is Forex?
Forex is the global over-the-counter market where currencies are exchanged. Prices are quoted as pairs, such as EUR/USD, and dealing runs across the Sydney, Tokyo, London and New York sessions on weekdays.
What is Forex trading?
Forex trading is taking a long or short position on a currency pair in order to profit from a change in the exchange rate. Retail traders usually do this through a broker as a CFD or rolling spot contract, not by taking delivery of cash.
When is the Forex market open?
It runs 24 hours from the Sydney open on Monday to the New York close on Friday, with a weekend break. Typical GMT hours are Sydney 22:00–07:00, Tokyo 00:00–09:00, London 08:00–17:00 and New York 13:00–22:00, subject to daylight saving.
What is a currency pair?
A pair prices one currency against another. The first code is the base, the second is the quote. EUR/USD at 1.1000 means one euro costs 1.1000 US dollars.
How does a Forex trade make money?
The position is opened at the bid or ask, then closed at a later price. The difference in pips times pip value, after spread, commission and swap, is the profit or loss. A long gains if the base rises; a short gains if the base falls.
What are spread and swap?
Spread is the difference between bid and ask, paid when you open (and reflected in the round-turn). Swap is overnight financing applied if the position is held past the broker’s rollover time. Both are costs or, for some swaps, a credit; both should be read on the contract specification.
Is Forex the same as exchanging cash at a bank?
No. A bank cash exchange is a one-off conversion, usually at a wide tourist spread. Retail Forex trading is a leveraged CFD or rolling spot position on a pair, with margin, pip value and the possibility of loss larger than the move in a holiday envelope of notes.
How large is the Forex market?
The BIS Triennial Survey estimated average daily OTC FX turnover at about $9.5 trillion in April 2025. That is a survey snapshot of dealer activity, not retail platform volume, and it is not a guarantee of liquidity in every pair at every hour.
Summary
Forex is the OTC market for currency pairs. Forex trading is a long or short on that pair, usually through a broker as a CFD. The dealing day travels from Sydney to Tokyo, London and New York. Costs are spread, any commission, and swap if the ticket is held overnight. Risk is the rate moving against the lot you chose, amplified when leverage is used to enlarge that lot, plus gap, stop-out and counterparty risk.
The next pages in this silo are the definitions that make a ticket numbers rather than adjectives: pip, lot, leverage, currency pair, and who a Forex broker is. Read the formulas there. Use this page as the market those formulas describe.
